Frequently
Asked Questions (FAQs)
Acquisition
and Transfer of Immovable Property in India by a Person Resident outside India Acquiring
immovable property in India by persons resident outside India is regulated in
terms of Section 6(3) (i) of the Foreign Exchange Management Act (FEMA), 1999
as well as by the regulations contained in Notification issued by RBI viz Notification
No FEMA. 21/2000-RB dated May 3, 2000, as amended from time to time. The persons
resident outside India are categorized as Non- Resident Indians (NRIs)
or a foreign national of Indian Origin (PIO) or a foreign national of non-Indian
origin. A person resident in India who is not a citizen of India is also covered
by the relevant Notifications.
2.
Statutorily, under the provisions of Section 6(5) of FEMA 1999, a person resident
outside India can hold, own, transfer or invest in Indian currency,
security or any immovable property situated in India if such currency, security
or property was acquired, held or owned by such person when he was a resident
in India or inherited from a person who was a resident in India. 3.
The regulations under the Notification No FEMA 21 dated May 3, 2000 permit a NRI
or a PIO to acquire immovable property in India other than agricultural land or,
plantation property or farm house. Further, foreign companies who have been permitted
to open an office in India are also allowed to acquire any immovable property
in India, which is necessary for or incidental to carrying on such activity. This
stipulation is not available to entities which are permitted to open liaison offices
in India.
4.
The relevant regulations covering the transactions in immovable property have
been notified vide RBI Notification No.FEMA 21/2000-RB dated May 3, 2000 and this
basic notification has been subsequently amended by the notifications detailed
below:
1. Notification
No.FEMA 64/2002-RB dated June 29, 2002;
2.
Notification No.FEMA 65/2002-RB dated June 29, 2002;
3.
Notification No.FEMA 93/2003-RB dated June 9, 2003; and
4.
Notification No. FEMA 146/2006-RB dated February 10 2006 (available with A.P.(DIR
Series) Circular No. 5 dated 16.8.2006 on website)
All
the above notifications are available on RBI website: www.fema.rbi.org.in. 5.
The restrictions on acquiring immovable property in India by a person resident
outside India would not apply where the immovable property is proposed to be acquired
by way of a lease for a period not exceeding 5 years or where a person is deemed
to be resident in India. In order to be deemed to be a person resident in India,
from FEMA angle, the person would need to comply with the criterion for residency
as defined in Section 2(v) of FEMA 1999. However, citizens of Pakistan, Bangladesh,
Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan cannot acquire or transfer
immovable property in India, (other than on lease, not exceeding five years) without
prior permission of the Reserve Bank. 6.
NRIs/PIO are allowed to repatriate an amount up to USD one million, per financial
year (April-March), out of the balances held in the NRO account subject to tax
compliance. This amount includes sale proceeds of assets acquired by way of inheritance
or settlement. 7.
While the statutory and regulatory provisions are indicated above, we have been
receiving several queries from individuals on operational procedures regarding
acquisition, holding and transferring of immovable property in India and repatriating/remitting
the proceeds arising from sale of such property. In order to clarify these issues,
we have attempted a set of FAQs on various issues relating to acquisition and
transfer of immovable property in India by a person resident outside India and
a person resident in India who is not a citizen of India. In
case there are other issues to be resolved, a reference may be made to the
Chief General Manager-in-Charge,
Foreign Exchange Department
Foreign
Investment Division,
Reserve Bank of India,
Central Office
Mumbai-
400 001. The FAQs
cover the following topics: (I)
Acquisition of immovable property in India by a person resident outside India
i.e. by a NRI / PIO / foreign national of non-Indian origin through -
i) purchase
ii)
gift
iii) inheritance (II)
Transfer of immovable property in India by a person resident outside India by
-
i) sale
ii) gift
iii) mortgage (III)
Mode of payment for purchase of property in India. (IV)
Repatriation of sale proceeds of property
i) purchased
ii)
received as gift
iii) inherited (V)
Provisions for Foreign Embassies / Diplomats / Consulate Generals. (VI)
Other issues.
I
Acquisition of Immovable Property in India
Q.1 Who
can purchase immovable property in India?
A.1 Under the general
permission available, the following categories can freely purchase immovable property
in India:
i) Non-Resident Indian (NRI)- that is a citizen of India resident
outside India
ii) Person of Indian Origin (PIO)- that is an individual
(not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or
China or Iran or Nepal or Bhutan), who 1.
at any time, held Indian passport, or
2.
who or either of whose father or grandfather was a citizen of India by virtue
of the Constitution of India or the Citizenship Act, 1955 (57 of 1955). The
general permission, however, covers only purchase of residential and commercial
property and not for purchase of agricultural land / plantation property / farm
house in India.
Q.2. Whether NRI/PIO can acquire agricultural
land/ plantation property / farm house in India?
A.2. No. Since
general permission is not available to NRI/PIO to acquire agricultural land/ plantation
property / farm house in India, such proposals will require specific approval
of Reserve Bank and the proposals are considered in consultation with the Government
of India.
Q.3. Do any documents need to be filed with Reserve
Bank of India after purchase? A.3.
No. An NRI / PIO who has purchased residential / commercial property under
general permission, is not required to file any documents with the Reserve Bank.
Q.4. How many residential / commercial properties can NRI / PIO purchase
under the general permission?
A.4. There are no restrictions on the
number of residential / commercial properties that can be purchased.
Q.5.
Can a foreign national of non-Indian origin be a second holder to immovable property
purchased by NRI / PIO?
A.5. No.
Q.6. Can a foreign
national of non-Indian origin resident outside India purchase immovable property
in India?
A.6. No. A foreign national of non-Indian origin, resident
outside India cannot purchase any immovable property in India. But, he/she may
take residential accommodation on lease provided the period of lease does not
exceed five years. In such cases, there is no requirement of taking any permission
of or reporting to Reserve Bank
Q.7 Can a foreign national who
is a person resident in India purchase immovable property in India?
A.7. Yes, but the person concerned would have to obtain the approvals,
and fulfil the requirements if any, prescribed by other authorities, such as the
concerned State Government, etc However, a foreign national resident in
India who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan,
China, Iran, Nepal and Bhutan would require prior approval of Reserve Bank. Such
requests are considered by Reserve Bank in consultation with the Government of
India.
Q.8 Can an office of a foreign company purchase immovable
property in India?
A.8. A foreign company which has established
a Branch Office or other place of business in India, in accordance with FERA /
FEMA regulations, can acquire any immovable property in India, which is
necessary for or incidental to carrying on such activity. The payment for acquiring
such a property should be made by way of foreign inward remittance through proper
banking channel. A declaration in form IPI should be filed with Reserve Bank within
ninety days from the date of acquiring the property. Such a property can also
be mortgaged with an Authorised Dealer as a security for other borrowings. On
winding up of the business, the sale proceeds of such property can be repatriated
only with the prior approval of Reserve Bank. Further, acquisition of
immovable property by entities who had set up Branch Offices in India and incorporated
in Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan
would require prior approval of Reserve Bank to acquire such immovable property.
However, if the foreign company has established a Liaison Office, it can
not acquire immovable property . In such cases, Liaison Offices, can take property
by way of lease not exceeding 5 years.
Q.9 Whether immovable
property in India can be acquired by way of gift ?
A.9. (a)
Yes, NRIs and PIOs can freely acquire immovable property by way of gift
either from
i) a person resident in India or
ii) an NRI
or
iii) a PIO.
However, the property can only be commercial or residential.
Agricultural land / plantation property / farm house in India cannot
be acquired by way of gift.
(b) A foreign national of non-Indian origin resident
outside India cannot acquire any immovable property in India through gift.
Q.10. Whether a non-resident can inherit immovable property
in India?
A.10. Yes, a person resident outside India i.e.
i)
an NRI
ii) a PIO and
iii) a foreign national of non-Indian origin can inherit
and hold immovable property in India from a person who was resident in India.
However, a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran,
Nepal and Bhutan should seek specific approval of Reserve Bank. Q.11.
From whom can the non-resident inherit immovable property?
A.11. A person resident outside India (i.e. NRI or PIO or foreign national
of non-Indian origin) can inherit immovable property from
(a) a person
resident in India.
(b) a person resident outside India
However, the
person from whom the property is inherited should have acquired the same in accordance
with the foreign exchange regulations applicable at that point of time. II.
Transfer of immovable property in India
(i) Transfer
by Sale Q.12
Can an NRI/ PIO/foreign national sell his residential / commercial property?
A.12. (a) NRI can sell property in India to-
i)
a person resident in India or
ii) an NRI or
iii) a PIO. (b)
PIO can sell property in India to
i) a person resident
in India.
ii) an NRI or
iii) a PIO – with
the prior approval of Reserve Bank
(c ) Foreign national of non-Indian origin including a citizen of Pakistan
or Bangaladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan
can sell property in India with prior approval of Reserve Bank to
i)
a person resident in India
ii) an NRI
iii) a PIO
Q.13.
Can an agricultural land / plantation property / farm house in India owned / held
by a non-resident be sold?
A.13. (a) NRI / PIO may sell
agricultural land /plantation property/farm house to a person resident in India
who is a citizen of India.
(b) Foreign national of non-Indian origin
resident outside India would need prior approval of Reserve Bank to sell
agricultural land/plantation property/ farm house in India
(ii)
Transfer by gift Q.14.
Can a non-resident gift his residential / commercial property?
A.14.
Yes.
(a) NRI / PIO may gift residential / commercial property to -
(i)
person resident in India or
(ii) an NRI or
(iii) PIO.
(b) foreign
national of non-Indian origin needs prior approval of Reserve Bank.
Q.15.
Can an NRI / PIO / Foreign national holding an agricultural land / plantation
property / farm house in India gift the same?
A.15. (a)
NRI / PIO can gift but only to a person resident in India who is a citizen
of India.
(b) foreign national of non-Indian origin needs prior approval
of Reserve Bank (iii)
Transfer through mortgage
Q.16. Can residential / commercial
property be mortgaged?
A.16. i) NRI / PIO can mortgage
to:
(a) an authorised dealer / housing finance institution in India –
without the approval of Reserve Bank.
(b) a party abroad - with prior approval
of Reserve Bank.
ii) a foreign national of non-Indian origin can mortgage
only with prior approval of Reserve Bank
iii) a foreign company which has established
a Branch Office or other place of business in accordance with FERA/FEMA regulations
has general permission to mortgage the property with an authorized dealer in India.
III.
Mode of payment for purchase Q.17.
How can an NRI / PIO make payment for purchase of residential / commercial property
in India ?
A.17. Payment can be made by NRI / PIO out of
(a) funds remitted to India through normal banking channel or
(b) funds held
in NRE / FCNR (B) / NRO account maintained in India
No payment can
be made either by traveller’s cheque or by foreign currency notes.
No
payment can be made outside India. Q.18
What shall be the option if there is refund of application money / payment made
by the building agencies / seller because of non-allotment of flat / plot / cancellation
of bookings / contracts ?
A.18. The amount of refund, together
with interest (net of income tax) can be credited to NRE account. This is subject
to condition that the original payment was made by way of inward remittance or
by debit to NRE / FCNR (B) account. (Please refer to A.P. (DIR) Series Circular
No. 46 dated 12.11.2002)
Q.19. Can NRI / PIO avail of loan
from an authorised dealer for acquiring flat / house in India for his own residential
use against the security of funds held in his NRE Fixed Deposit account / FCNR
(B) account?
A.19. Yes, such loans are subject to the terms and
conditions as laid down in Schedules 1 and 2 to Notification No. FEMA 5/2000-RB
dated May 3, 2000 as amended from time to time. However, banks cannot grant
fresh loans or renew existing loans in excess of Rupees 20 lakh against NRE and
FCNR(B) deposits either to the depositors or to third parties [cf. A.P.
(DIR Series) Circular No. 29 dated January 31, 2007].
Such
loans can be repaid
(a) by way of inward remittance through
normal banking channel or
(b) by debit to his NRE / FCNR (B) / NRO account
or
(c) out of rental income from such property.
(d) by the borrower's
close relatives, as defined in section 6 of the Companies Act, 1956, through their
account in India by crediting the borrower's loan account.
Repatriation:
(a). In case the amount has been
received from inward remittance or debit to NRE/FCNR(B)/NRO account for acquiring
the property or for repayment of the loan, the principal amount can be repatriated
outside India.
For this purpose, repatriation outside India
means the buying or drawing of foreign exchange from an authorised dealer
in India and remitting it outside India through normal banking channels or crediting
it to an account denominated in foreign currency or to an account in Indian currency
maintained with an authorised dealer from which it can be converted in foreign
currency
(b) in case the property is acquired out of Rupee resources and/or
the loan is repaid by close relatives in India ( as defined in Section 6 of the
Companies Act, 1956), the amount can be credited to the NRO account of the NRI/PIO.
The amount of capital gains, if any, arising out of sale of the property can also
be credited to the NRO account.
NRI/PIO are also allowed by the Authorised
Dealers to repatriate an amount up to USD 1 million per financial year out of
the balance in the NRO account for all bonafide purposes to the satisfaction of
the authorised dealers, subject to tax compliance.
Q.20. Can
NRI / PIO, avail of housing loan in rupees from an authorised dealer or housing
finance institution in India approved by the National Housing Bank for purchase
of residential accommodation or for the purpose of repairs / renovation / improvement
of residential accommodation ? How can such loan be repaid?
A.20.
Yes, NRI/PIO can avail of housing loan in rupees from an Authorised Dealer
or housing finance institution subject to certain terms and conditions.
(Please refer to Regulation 8 of Notification No. FEMA 4/2000-RB dated 3.5.2000 and A.P. (DIR) Series Circular No. 95 dated April 26, 2003).
Such
a loan can be repaid
(a) by way of inward remittance through normal banking
channel or
(b) by debit to his NRE / FCNR (B) / NRO account or
(c) out
of rental income from such property.
(d) by the borrower's close relatives,
as defined in section 6 of the Companies Act, 1956, through their account in India
by crediting the borrower's loan account. Q.21.
Can NRI/PIO avail of housing loan in rupees from his employer in India?
A.21. Yes, subject to certain terms and conditions (Please refer to Regulation
8A of Notification No. FEMA 4/2000-RB dated May 3, 2000 and A.P. (DIR Series)
Circular No.27 dated October 10, 2003).
IV
Repatriation of sale proceeds of residential / commercial property purchased by
NRI / PIO Q.22.
Can NRI / PIO repatriate the sale proceeds of immovable property? If so, what
are the terms?
A.22. NRI / PIO may repatriate the sale
proceeds of immovable property in India
(a) If the property was
acquired out of foreign exchange sources i.e. remitted through normal banking
channels / by debit to NRE / FCNR (B) account
The amount to be repatriated
should not exceed the amount paid for the property: 1.
in foreign exchange received through normal banking channel or
2. by
debit to NRE account(foreign currency equivalent, as on the date of payment) or
debit to FCNR (B) account. Repatriation
of sale proceeds of residential property purchased by NRI / PIO out of foreign
exchange is restricted to not more than two such properties.
Capital gains,
if any, may be credited to the NRO account from where the NRI/PIO may repatriate
an amount up to USD one million, per financial year, as discussed below.
(b) If the property was acquired out of Rupee sources, NRI or PIO may
remit an amount up to USD one million, per financial year, out of the balances
held in the NRO account (inclusive of sale proceeds of assets acquired by way
of inheritance or settlement), for all the bonafide purposes to the satisfaction
of the Authorized Dealer bank and subject to tax compliance. Q.23.
Can an NRI/PIO repatriate the proceeds in case the sale proceed was deposited
in NRO account?
A.23. From the NRO account, NRI/PIO may repatriate
up to USD one million per financial year (April-March), which would also include
the sale proceeds of immovable property.
Q.24. If a Rupee loan
was taken by NRI/PIO from Authorised Dealer or housing finance institution for
purchase of residential property can an NRI / PIO repatriate the sale proceeds
of such property?
A.24. Yes, provided the loan has been subsequently
repaid by remitting funds from abroad or by debit to NRE/FCNR(B) accounts (Please
see A.P. (DIR) Series Circular No. 101 dated 5.5.2003)
Q.25.
If the property was purchased from foreign inward remittance or from NRE / FCNR
(B) account, can the sale proceeds of property be repatriated immediately?
A.25. Yes. Q.26.
Is there any restriction on number of residential properties in respect of which
sale proceeds can be repatriated by NRI / PIO?
A.26. Yes, sale
proceeds of not more than two residential properties can be repatriated. Q.27.
If the immovable property was acquired by way of gift by the NRI/PIO, can he repatriate
abroad the funds from sale?
A.27. The sale proceeds of immovable
property acquired by way of gift should be credited to NRO account only. From
the balance in the NRO account, NRI/PIO may remit up to USD one million, per financial
year, subject to the satisfaction of Authorised Dealer and payment of applicable
taxes. Q.28
If the immovable property was received as inheritance by the NRI/PIO can he repatriate
the sale proceeds?
A.28. Yes, general permission is available
to the NRIs/PIO to repatriate the sale proceeds of the immovable property inherited
from a person resident in India. NRIs/PIO may repatriate an amount
not exceeding USD one million, per financial year, on production of documentary
evidence in support of acquisition / inheritance of assets, an undertaking by
the remitter and certificate by a Chartered Accountant in the formats prescribed
by the Central Board of Direct Taxes vide their Circular No.10/2002 dated October
9, 2002. [cf. A. P. (DIR Series) Circular No.56 dated November 26,
2002].
In case of a foreign national, sale proceeds can also be repatriated
even if the property is inherited from a person resident outside India.
But this is allowed only with prior approval of Reserve Bank. The foreign national
has to approach Reserve Bank with documentary evidence in support of inheritance
of the immovable property and the undertaking and the C.A. Certificate as mentioned
above.
The general permission for repatriation of sale proceeds of immovable
property is not available to a citizen of Pakistan, Bangladesh, Sri Lanka, China,
Afghanistan and Iran and he has to seek specific approval of Reserve Bank.
As FEMA specifically permits transactions only in Indian Rupees with citizens
of Nepal and Bhutan, the question of repatriation of the sale proceeds in foreign
exchange to Nepal and Bhutan would not arise. V.
Provisions for Foreign Embassies / Diplomats / Consulate Generals Q.29.
Can Foreign Embassies / Diplomats / Consulate General purchase / sell immovable
property in India ?
A.29. Yes, Foreign Embassies / Diplomats / Consulate
Generals can purchase and sell any immovable property other than agricultural
land / plantation property / farm house in India with prior clearance from
the Government of India, Ministry of External Affairs. The payment should
be made by foreign inward remittance through normal banking channel. VI.
Other issues Q.30.
Can NRI / PIO rent out the residential / commercial property purchased out of
foreign exchange / rupee funds?
A.30. Yes, NRI/PIO can rent out
the property without the approval of the Reserve Bank. Rent received can
be credited to NRO / NRE account or remitted abroad. Powers have been
delegated to the Authorised Dealers to allow repatriation of current income like
rent, dividend, pension, interest, etc. of NRIs/PIO who do not maintain an NRO
account in India based on an appropriate certification by a Chartered Accountant,
certifying that the amount proposed to be remitted is eligible for remittance
and that applicable taxes have been paid/provided for.[cf. A.P. (DIR Series) Circular
No. 45 dated May 14, 2002].
Q.31.
Can a person who had bought immovable property when he was a resident, continue
to hold such property even after becoming an NRI/PIO?
A. 31.
Yes, he can continue to hold the residential / commercial property / agricultural
land/ plantation property / farm house in India without the approval of the Reserve
Bank. Q.
32. In which account can the sale proceeds of such immovable property be credited
?
A.32. The sale proceeds may be credited to NRO account. Q.33.
Can the sale proceeds of the immovable property referred to in Q.No. 31 be remitted
abroad ?
A.33. Yes, provided the amount to be remitted does not
exceed USD one million per financial year, for all bonafide purposes to the satisfaction
of Authorised Dealers and subject to tax compliance. Q.34.
Can foreign nationals of non-Indian origin resident in India or outside India
who had earlier acquired immovable property under FERA with specific approval
of Reserve Bank continue to hold the same? Can they transfer such property?
A.34. Yes, they may continue to hold the immovable property. However, they
can transfer the property only with the prior approval of Reserve Bank. Q.35.
Is a resident in India governed by the provisions of Foreign Exchange Management
(Acquisition and transfer of immovable property in India) Regulations, 2000?
A.35. A person resident in India who is a citizen of Pakistan or Bangladesh
or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan is governed by
the provisions of Foreign Exchange Management (Acquisition and Transfer of Immovable
Property in India) Regulations, 2000 ie. he would require prior approval of Reserve
Bank for acquisition and transfer of immovable property in India even though he
is resident in India. Such requests are considered by Reserve Bank in consultation
with the Government in India Definitions
Q.36.Where are the terms a `person resident in India' and a `person resident
outside India' defined ?
A.36. Section 2 (v) and Section 2 (w)
of the FEMA, 1999 defines `person resident in India' and a `person resident outside
India' respectively. Q.37.
What is meant by a person resident in India ?
A.37. Under FEMA,
a person resident in India is defined as a person residing in India for more than
one hundred and eighty-two days during the course of the preceding financial year
(April-March) and who has come to or stays in India either for taking up employment,
carrying on business or vocation in India or for any other purpose, that would
indicate his intention to stay in India for an uncertain period. In other
words, to be treated as `a person resident in India' under FEMA, a person has
not only to satisfy the condition of the period of stay (being more than 182 days
during the course of the preceding financial year) but has also to comply with
the condition of the purpose / intention of stay.
Q.38.
What is meant by a person resident outside India ?
A.38. The
Act defines a 'a person resident outside India' as a person who is not a person
resident in India' (As defined in Q.No. 37 above)
Q.39. Who can
determine whether a person is resident in India or not?
A.39.
Reserve Bank does not determine the residential status. Under FEMA, residential
status is determined by operation of law. The onus is on an individual to prove
his / her residential status, if questioned by any authority. Q.40.
If a foreign national is a person resident in India as per the provisions of Section
2(v) (i)B of the FEMA, 1999, does he require approval of Reserve Bank to purchase
any immovable property in India ?
A.40 A foreign national
resident in India does not require approval from Reserve Bank from FEMA
angle, but approvals if any required in terms of regulations prescribed by other
authorities such as the concerned State Government etc. will have to be obtained
by him / her. However, a foreign national resident in India who is a citizen of
Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan requires
specific prior approval of Reserve Bank. |